Question

Suppose Clancy would like to invest $1,000 of his savings.One way of investing is to purchase stock or bonds from a private company.Suppose NanoSpeck, a biotechnology firm, is selling bonds to raise money for a new lab—a practice known as __________(equity or debt?).Buying a bond issued by NanoSpeck would give Clancy___________(a claim to partial ownership in, or an IOU promise to pay?)in the firm.In the event that NanoSpeck runs into financial difficulty, __________(clancy and the other bondholders, or the stockholers) will be paid first.Suppose instead Clancy decides to buy 100 shares of NanoSpeck stock.Which of the following statements are correct? Check all that apply.a) The price of his shares will rise if NanoSpeck issues additional shares of stock.b) An increase in the perceived profitability of NanoSpeck will likely cause the value of Clancy's shares to rise.c) Expectations of a recession that will reduce economy-wide corporate profits will likely cause the value of Clancy's shares to decline.Alternatively, Clancy could invest by purchasing bonds issued by the U.S. government.Assuming that everything else is equal, a corporate bond issued by an electronics manufacturer most likely pays a _________(higher or lower?)interest rate than a municipal bond issued by a state.

Answer 1

Answer:

Financial institutions in the U.S. economy

Suppose Clancy would like to invest $1,000 of his savings.

One way of investing is to purchase stock or bonds from a private company.

Suppose NanoSpeck, a biotechnology firm, is selling bonds to raise money for a new lab—a practice known as debt (equity or debt?).

Buying a bond issued by NanoSpeck would give Clancy an IOU promise to pay_(a claim to partial ownership in, or an IOU promise to pay?)in the firm.

In the event that NanoSpeck runs into financial difficulty, clancy and the other bondholders (clancy and the other bondholders, or the stockholers) will be paid first.

Suppose instead Clancy decides to buy 100 shares of NanoSpeck stock.

Which of the following statements are correct? Check all that apply.

a) The price of his shares will rise if NanoSpeck issues additional shares of stock. False

b) An increase in the perceived profitability of NanoSpeck will likely cause the value of Clancy's shares to rise. True

c) Expectations of a recession that will reduce economy-wide corporate profits will likely cause the value of Clancy's shares to decline. true

Alternatively, Clancy could invest by purchasing bonds issued by the U.S. government.

Assuming that everything else is equal, a corporate bond issued by an electronics manufacturer most likely pays a HIGHER (higher or lower?)interest rate than a municipal bond issued by a state.